Startups, downturn spur need for shared office space

Regus adding locations in coming months

April 13, 2012|By Wailin Wong, Chicago Tribune reporter

Steven Gibson, left, and Chris Brown, right, work for Parts Trader LLC at a shared office in the John Hancock Center. The space is run by Regus, which operates 29 locations in the Chicago area and is planning four more. (Zbigniew Bzdak, Chicago Tribune)

The life of a peripatetic startup guy didn't work for David Vinca.

The Chicago-based founder of eSpark Learning, a company that designs personalized educational programs for elementary schoolchildren using iPad apps, tried working from home and at a local coffee shop. Neither of those places was suitable. Squatting in the lobby of the Gleacher Center, where his alumnus status at the University of Chicago gave him access to the Wi-Fi network, was inadequate once his startup began hiring employees.

After examining his options, Vinca relocated to a center at 2 Prudential Plaza run by Regus, a Luxembourg-based company that runs shared office spaces around the world. Full-time private office space starts at less than $300 a month, with rates varying by location, size and term lengths.

"What we were looking for was cheap (space) because we were angel funded at the time," said Vinca, a former management consultant who worked on the 42nd floor of the Prudential Building. "One of the advantages I saw in Regus is they take care of a lot of things for you. I could focus on meeting with customers, recruiting talent, all the things required to make the business happen."

Vinca and eSpark Learning are part of a growing trend of individual workers and businesses seeking professional space at flexible terms. This group includes startups, newly unemployed who have become independent consultants and satellite branches of larger companies.

The dynamic is benefiting Regus, which is opening four new centers in the Chicago area this year. The company had 473 U.S. centers in 2011, compared with 353 in 2006. Worldwide, it operates 1,203 locations.

The company's expansion coincides with the local rise of shared workspaces for a growing number of technology companies. The city boasts several co-working centers, which offer low commitment and cater mostly to people in technology and creative fields.

The Illinois Technology Association has housed companies in its TechNexus clubhouse since 2007 and several new entrants have joined the scene: Fail Cube and 1871 in the Merchandise Mart, as well as Catapult Chicago in River North.

The state of Illinois contributed $2.3 million in the form of a capital grant to 1871, a 50,000-square-foot space that opens in May with about 400 desks for digital technology startups. Business incubators such as Sandbox Industries and Excelerate Labs also provide space for their affiliated companies.

Regus operates 29 locations in the Chicago area. It will open centers in Lincoln Park and Orland Park in June, followed by Lake Forest and Hoffman Estates, also this year. The Lincoln Park location near North and Clybourn avenues is the company's first in a Chicago neighborhood.

"Chicago is actually representative of what our strategy is globally right now," said Scott Nelles, a regional director at Regus. "What we're trying to do is open up new locations where people live. … Whether it's a business or an individual, there is a growing trend for people to want to work closer to their home. We're definitely seeing a trend away from home working."

Survivors of the economic downturn have also found homes in outsourced offices. The three partners of executive search firm CMC Consultants Inc., for example, liked their cushy digs on the 15h floor of the John Hancock Center but didn't want to sign a long-term commercial lease in an uncertain business climate.

They ended up moving just seven floors down to a Regus center, forgoing a traditional lease that would have required a minimum three-year commitment. The decision "made the most sense because we could take bigger office space as (we grew)," said CMC partner Debbie Berman. "In one year, we doubled our space."

Industry data from WorldatWork, a nonprofit focused on human resources, show that the economic downturn has put the world of remote workers in transition. The group's most recent report, released last year, showed that the total number of teleworkers shrank in 2010, the first decline since WorldatWork began collecting the data. The organization defines teleworkers as people who worked from home or remotely for an entire day at least once a month. This group numbered 26.2 million in 2010, compared with 33.7 million in 2008.

WorldatWork attributed the decline to high unemployment and worries over job security, with people concerned that their employers will view them unfavorably if they're physically absent from the office.

Guillermo Rotman, chief executive of the Americas for Regus, said he believes the jobless rate in the U.S. has spurred demand for his firm's services. Layoffs led to "a lot of people who became consultants out of necessity," he said, and Regus allows an independent freelancer or startup to transition into larger space within the same center as business grows.

A worker who doesn't want physical space can pay less than $100 per month for a "virtual office," which provides a mailing address and telephone answering services.

Keeping the official business address at the Hancock Center, meanwhile, has helped CMC Consultants with its image. Berman said many of the company's clients are private investment firms and high-net-worth family offices who "appreciate us being on Michigan Avenue."